Missive to Sovereign Wealth Funds.
Subject: The time is ripe for our Sovereign Wealth Funds (SWF) to invest locally.
Valuations are at all-time low while I write this letter and what better time can any cash rich investor would hope for; except now!
Be it real estate prices, equity prices or any alternative class; they are all so attractively priced that I am reminded of Warren Buffet's annual letter in which he writes that Charles and he feel like mosquitoes in a nudist camp!
The UAE, Dubai in particular, has weathered the storm and is steering strongly out of it. I can see signs of tremendous improvement and am absolutely confident that the UAE will emerge wiser and stronger than its neighbours. At this time, I reiterate that Sovereign Wealth Funds should fulfil the promise and objective they were built for (ie, strengthening and supporting the local economy).
Less than a few months ago, a $10 billion (Dh36.7 billion) bond subscription did wonders to business confidence locally and internationally.
The reflection on the credit default swaps (CDS) was almost immediate. Imagine the scenario if the SWF invests reasonable amount of money into the stock market.
The blue chips are at all-time lows, some near book values and some below, almost all at extremely low P/E (price/earnings) multiples. A perfect time to be picked up! The same can be said for real estate.
SWFs have an obligation to the nation. They should have a short-, medium- and a long-term plan to pump in money into the local UAE economy primarily. They should invest in unfinished construction & infrastructure projects in the UAE.
This will improve the circulation of money into the economy which is of paramount importance now. This will enhance business confidence and bring about greater stability and will act as a catalyst for other investments and definitely generate direct and indirect employment.
Investing in projects in the UAE will strengthen the economy which provides safe and sure returns and above all fulfil the key objectives for which the SWF were created.
Such opportunistic times will not wait and the time is now for the SWFs to act and act swiftly.
Al Nisr Publishing LLC 2009. All rights reserved.
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|Publication:||Gulf News (United Arab Emirates)|
|Date:||May 27, 2009|
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